Our Finance Gap Insurance policies are different. Why and how do they work?
Be cautious when shopping for your policy. This list should help you.
There are subtle yet crucial differences in cover from provider to provider, despite them 'appearing' to be the same and described as the same.
We know some on-line and dealership policy providers;
- Will not cover theft of vehicle with use of keys (a common form of theft today) - our policies will,*
- Impose a payout reduction clause year on year to reduce their risk - not so with our policies,
- Only pay up to 100% of Glasses Guide retail value - we cover up to 110%,
- Will not take factory fitted options into account - ours will, together with £1500 dealer fit accessories,
- Pay you less if you negotiated a healthy part exchange price at time of buying your car - we do not!,
- Will not pay a finance settlement figure if it exceeds the purchase price - ours will,
- Require you to 'register your personal details' before giving a quotation - we do not,
- Reduce their risk to a maximum of 3 year cover - we offer cover up to 5 years,
- Only cover vehicles valued up to £50,000 - we cover vehicles up to £75,000,
Do please read the policy terms and conditions carefully before buying anywhere. These are just a few of the negative terms we found whilst browsing.
" Our Gap Insurance products are of such high quality and are so comprehensive, prestige franchises such as BMW, Mercedes and Audi choose to sell them - albeit at substantially higher prices!. As you would expect those dealerships and their customers insist on the best. "
Now you know what to look for - how does the policy work?
In the event of an insurance 'write off' due to accident, fire or theft, Finance Gap Insurance will pay the difference between what your finance company require to end your loan and what your motor insurer agrees to pay. The amount FinanceGap Insurance will pay toward your finance settlement will depend upon what level of cover you have chosen.
Finance Gap Insurance is suitable for those who use the following types of finance;
- Hire Purchase,
- Lease Purchase,
- PCP (Personal Contract Plans),
- Contract Hire,
- Leasing,
Finance Gap insurance can provide valuable cover for new or used car owners. Cover may be purchased within 180 days from date of vehicle invoice.
Finance Gap Insurance is available for 1 to 5 year periods and a choice of claim limits;
- £5,000.00,
- £10,000.00.
How would this 'gap' between finance company settlement and motor insurers payout occur? Nearly all finance agreements have 'front loaded' interest and this is no different to how a repayment mortgage is calculated. The front loaded interest effect combined with the indisputable fact that vehicles have a steeper depreciation in the early part of ownership can often create a significant 'finance gap' when a vehicle is unexpectedly written off due to accident, fire and more commonly - theft.
This Finance Gap Insurance product is popular for those who;
- Travel high mileage,
- Finance with little or no deposit,
- Use Contract Hire or Leasing facilities,
- Finance using PCP or Balloon Payment agreements,
- Prefer to re-pay over 48 months or more.
Why Is It Popular For Those Categories?
High Mileage
It will come as no surprise to hear that high mileage cars depreciate much faster and to a greater degree than low or average mileage cars. What may come as a surprise is just how low an insurance assessor will value your high mileage car, if you are unfortunate enough to have it stolen or written off in an accident or theft. The sting is that high mileage suggests you may be more dependent upon a reliable car than most drivers, and yet your financial shortfall may be substantial.
Little Or No Deposit
Regardless of where you borrow, most agreements have interest 'front loaded'. That means your monthly payments may not be reducing the loan in line with your cars depreciation. In the event of a write off, you could find that your insurer may not pay you enough to re-pay your lender.
Contract Hire Or Leasing
These agreements will almost certainly impose a financial shortfall if your car is written off. Because these agreements are essentially 'long term rental' agreements, you are contracted to make all the repayments, and there are rarely any payment waivers in the event of write off. When calculating a Lease or Contract Hire agreement, the lender expects to recover the market value of the vehicle at the end of the agreement and all of the monthly payments plus VAT. Individuals or businesses using these facilities are very likely to be substantially exposed in the event of write off.
PCP & Balloon Payment Agreements
PCP and balloon payment schemes 'defer' a lump sum payment to the lender until the end of the agreement. In these agreements, interest will almost certainly be 'front loaded', and unless you pay a substantial deposit, the combination of front loaded interest and a deferred lump sum will create a very high probability of a financial shortfall if your car is written off. This product meets the demands and needs of those who wish to ensure that they are covered for the financial loss they might incur in the event of a write off due to Accident, Fire or Theft.
PCP & Balloon Payment Agreements
PCP and balloon payment schemes 'defer' a lump sum payment to the lender until the end of the agreement. In these agreements, interest will almost certainly be 'front loaded', and unless you pay a substantial deposit, the combination of front loaded interest and a deferred lump sum will create a very high probability of a financial shortfall if your car is written off. This product meets the demands and needs of those who wish to ensure that they are covered for the financial loss they might incur in the event of a write off due to Accident, Fire or Theft.
If you are repaying over 48 months or more
In longer term agreements, the effect of 'front loaded' interest is most evident and costly in the event of an unexpected early settlement due to an insurance write off. The write off may occur before your outstanding capital has reduced in line with vehicle depreciation.